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Tender: Definition, Example and Related Terms

What is a Tender ?

Imagine you are playing a game where you have to sell something, like a toy car. You know that there are many people who would like to buy your car, but you want to make sure you get the best price. So, you ask everyone to write down their best price on a piece of paper and give it to you. You then look at all the pieces of paper and sell your car to the person who offered the most money. This process is called tendering, and the pieces of paper are called tenders.

In the business world, instead of toy cars, companies might be selling goods, services, or even contracts for construction projects. Just like in our game, they want to make sure they get the best deal, so they ask different businesses to submit their best offers, or 'bids', in a formal document called a tender. The company then reviews all the tenders and chooses one or more businesses to work with. This is how businesses compete to win contracts. It's a fair process because everyone has an equal chance to submit their best offer.

Tendering is not just about the price, but also about the quality of goods or services a business can provide, their reputation, and their ability to deliver on time. For the company selling the contract, tendering can help them find the best business to work with. For the businesses bidding, it can be a chance to win a valuable contract and grow their business. But, tendering also has its challenges. It can be a lengthy and costly process, with no guarantee of winning. That's why businesses need to be careful and strategic when deciding to tender.

Tendering is a very common way for governments and large companies to procure goods and services.


  • Scenario Description
    A city needs a new library built. Instead of choosing a construction company straight away, they issue a public tender. In this example, the city is the company selling the contract. They want the best deal for their new library, so they issue a public tender. This is a call for construction companies to submit their best offers. The tender might include details about the project, like the size and design of the library, the deadline for completion, and the budget. Construction companies then prepare their bids, detailing how they would complete the project, how much it would cost, and why they should be chosen. The city reviews all the tenders and chooses the best one or more to award the contract to.
    A large corporation wants to upgrade its computer systems. It invites selected IT companies to submit a tender. In this case, the corporation is selling the contract. Instead of a public tender, they have chosen specific IT companies to invite. This is known as an invited tender. The IT companies would submit their tenders, including their proposed solution, cost, and timeline. The corporation then chooses the best tender(s) to award the contract to.

Related terms